Govt to seek NPA relief for companies hit by coronavirus

The move follows a petition from some industry representatives to finance minister Nirmala Sitharaman to not just relax the norms but also ensure access to funds to tide over payment issues that may arise due to problems in accessing inputs and critical raw material.

NEW DELHI: The government is going to seek a relaxation in rules for classification of bank loans to a certain set of companies as a “sub-standard” asset, citing difficulties faced by them. These entities are engaged in export and import, or are those that depend on raw materials and inputs, from China where businesses have been impacted due to the coronavirus outbreak.

The move follows a petition from some industry representatives to finance minister Nirmala Sitharaman to not just relax the norms but also ensure access to funds to tide over payment issues that may arise due to problems in accessing inputs and critical raw material. The proposal is part of a host of measures that have been identified by the finance ministry for action, following consultations with industry and other government departments, sources told TOI.

The finance ministry is expected to take up the issue with the Reserve Bank of India (RBI) over the next few days to ensure that companies that are part of special mention accounts (SMAs) continue to get access to funds despite payment problems.

The change in the Income Recognition and Asset Classification (IRAC) norms is seen to be a temporary measure till the impact of the deadly virus recedes. A company is put in an SMA-0 category if the principal or loan remains unpaid for up to 30 days, while defaults of 31 to 60 days results in an SMA-2 classification. Amounts remaining overdue for up to 90 days lead to an SMA-3 categorisation.

During the interaction, it had emerged that some of the industries — such as pharmaceuticals, electronics, auto parts and solar equipment — had been impacted by coronavirus, which has now claimed over 2,200 lives and infected close to 80,000 people.

Following the FM’s consultations, the government has already moved in to invoke the “force majeure” clause to provide relief to suppliers who are finding it tough to execute government contracts due to the coronavirus outbreak. Late Thursday evening, the government instructed customs authorities to provide 24x7 clearance at all airports, seaports and inland container depots. Some of the other moves are expected to be announced over the coming days.